Analysis

Analysts predict an early and sudden drop in crude oil prices

The global economy tends to experience a sudden drop in oil prices, the same or worse than what happened 27 years ago, says an analyst at the Royal Institute of International Affairs British.
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"The markets work and the situation is very reminiscent of the 1981-1986 period, culminating in a dramatic drop in oil prices in 1986," says Stevens in his article published today in The Financial Times.
According to Stevens, the situation in the world oil market is dominated by the following factors: social unrest and the current policy in the Middle East and North Africa, known as the Arab Spring, the rapid development of technology oil and gas extraction from shale, reduction of subsidies for oil in the Middle East, India and China, and the increasing application of energy saving measures.
Especially the analyst emphasizes the role of oil-rich states such as Saudi Arabia (the most important U.S. ally among states of OPEC), which sometimes acts as a stabilizing factor in setting oil prices.
"Saudi Arabia then [after 1986] acted as the so-called 'swing producer' [producer that plays a key role in the formation of prices] in order to keep prices high. Their eventual rejection of that role in 1985 led to the collapse prices of 1986. During the last nine months, Saudi Arabia has taken the silence in that role, "says the analyst.
"The trends increases in the world oil market threaten with a significant drop in prices," says Stevens.

Oil prices fell today 26 July, by concerns of a possible slowdown in China and decades of high levels of oil output. The futures of the oil in The United States for September fell 0.95 % up to coming to the 104.49 at 5:43 P.M. EDT